When, on 14 September 2012, the government announced new permissible foreign direct investment levels in a number of sectors – most importantly in multi-brand retail – it almost appeared as if the train of economic reforms, shunted off and languishing in a railshed for several years, had been pulled back on track and given the green signal for a new journey. And some days later, the report of the Kelkar Committee, appointed by the Ministry of Finance to outline a roadmap to fiscal consolidation, proved, if any more evidence was needed, that the train had been recalled into service none too soon.

The Kelkar Committee report pulls no punches. As has been reported widely, it uses the term “perfect storm” to describe the fiscal situation that the economy could be hurtling towards, if swift corrective measures were not taken immediately. The storm brewing on the horizon, it warned, could be worse than the one that hit the economy in 1991. According to it, as things stand, by the end of fiscal year 2013, the government will be in the red by as much as Rs 1,300 billion more than the Rs 5,100 billion it had projected in the Union Budget; in other words, the fiscal deficit will be more than 20 per cent higher than promised. On the one hand, tax revenue and disinvestment targets are unlikely to be met, and on the other, subsidies are increasing, at the expense of plan expenditure, which has been cut. The negative impacts range from higher inflation, flight of foreign capital and a further growth slowdown that could have toxic socio-economic and political impact, given that millions of young Indians are entering the workforce every year.

Twenty-one years after the reforms process began, it is natural that most of our attention is drawn to the macroeconomic policy prescriptions. We can array various arguments on both sides of any debate, on subsidies, on cash transfers, on disinvestment, on opening up this sector or that to foreign direct investment, on double-taxation treaties, and plan expenditure versus non-plan. But we keep missing the elephant in the room, we continue to ignore the enormous problematic beast that stares us in the face.

“More efficient functioning of the government machinery”, only one in a long list of recommendations made by the Kelkar Committee, is the elephant in the room.

India in 2012 is nearly unrecognisable in many ways from the India in 1991. We stand today at a critical point in India’s economic history. Unless we address the issue of internal reforms urgently, the future will not forgive us

India in 2012 is nearly unrecognisable in many ways from the India in 1991. We stand today at a critical point in India’s economic history. Unless we address the issue of internal reforms urgently, the future will not forgive us.

As Arun Maira, Member of the Planning Commission, and former India Chairman of the Boston Consulting Group, wrote recently: “What is necessary is a slew of institutional reforms to improve the Indian economy’s ability to implement programmes and projects faster; reforms to improve citizens’ confidence in the delivery capabilities of institutions of government; and reforms of policymaking processes to make them more transparent and more inclusive to arrest the declining trust in institutions of government and big business.”

This second track of reforms must be opened with utmost urgency and commitment of purpose.

True inclusion can happen only when the good intentions of policy overcome all the myriad hurdles set up on the long road from ministry to citizen and appear before the last Indian as concrete tangible transactions that will lead to a better quality of life.

That can only happen when our democracy is truly participative, the workings of our government are transparent, and our governance and delivery processes are re-engineered for speed and simplicity.

Right to Information

As far as transparency goes, the Right to Information Act has been a truly pathbreaking piece of legislation, empowering the average Indian as few other Acts of Parliament have done. After all, much of the power of a bureaucracy comes from its ability to withhold information. Suspicion and secrecy have been the hallmarks of Indian babudom, from the lowliest clerk to the loftiest official. RTI has been a huge step forward.

But for RTI to deliver all that it is capable of, we need the information to be there in coherent and accessible form, in the first place. Some years ago, the BBC reported the strange case of Rakesh Shukla, a poor farmer from Chhattisgarh. Shukla asked local authorities for information on paddy field purchases in his area. Well, he got more information than he had ever bargained for, and also a bill forRs 182,000. The authorities told him that they had to spend Rs 108,000 on photocopying over 90,000 copies of official papers relating to the purchases. According to the BBC, “the documents filled an entire room”.

Administrative Reforms

The weakest link in our information system is record keeping, and land records are probably the most important public documents in any governance system. But land records are in very poor state all over the country. Comprehensive land surveys have not been carried out over the past 70 years anywhere in India. The Second Administrative Reforms Commission set up by the Department of Administrative Reforms and Public Grievances, under the Ministry of Personnel, Public Grievances and Pensions, recommended that the Government of India create a Land Records Modernisation Fund, and set aside, as a one-time measure, 1 per cent of the funds of all flagship programmes for a period of five years for updating records, improving infrastructure, creating manuals and establishing Public Records Offices.

These recommendations were submitted in 2006. A Land Records Modernisation Programme was launched in 2008. Till date, the Central Government has released Rs 6.9 billion to the states for conducting surveys, and updating and digitising land records. But, of this amount, Rural Development Minister Jairam Ramesh revealed in September 2012, about Rs 5.89 billion ( more than 85 per cent of the money disbursed) have remained unspent. Nineteen of the 36 states and union territories have not utilised the allocated money at all.

The Administrative Reforms Commission (ARC) also suggested that a printed priced publication in the local language, revised at least once a year, should be available in each public office and supplied on demand.

Indeed, the ARC was set up with a mandate “to prepare a detailed blueprint for revamping the public administration system.” Its last report was submitted in April 2009. Cabinet committees have accepted almost all of its recommendations. Yet, little has happened on the ground, as far as implementation of these recommendations go.

The interface between high policy and the common citizen is the ground level administrative window, which is the tip of the finger of the outstretched arm of the State. And the undeniable truth is that most Indians find the touch of that fingertip rather unpleasant. They see the State machinery, in terms of both people and processes, as unresponsive, disdainful and often frightening. When one seeks recourse by writing to a higher authority, even a Governor or a Chief Minister, his letters are marked to the same departments which have frustrated all his efforts and wasted his time.

The Sixth Central Pay Commission noted in its report: “For the common man, bureaucracy denotes routine and repetitive procedures, paperwork and delays. This, despite the fact that the Government and bureaucracy exist to facilitate the citizens in the rightful pursuit of their legal activities.… Non-performance of the administrative structures, poor service quality and lack of responsiveness, and the subjective and negative abuse of authority have eroded trust in governance systems which needs to be restored urgently.”

Very few countries where a public servant, who, though an agent of the government, has the power to invoke Constitutional rights against the government, which is his/her employer

The trust deficit needs to be treated as equally important to the fiscal deficit.

Governance Reforms

The Government of India prescribes a Code of Conduct for Ministers, both at the central and state levels. The Administrative Reforms Commission found this inadequate and suggested the addition of a Code of Ethics. It recommended that dedicated units be set up in the offices of the Prime Minister and the Chief Ministers to monitor the observance of the Code of Ethics and the Code of Conduct. These units, it suggested, should also be empowered to receive public complaints regarding violation of the Code of Conduct. The Prime Minister or the Chief Minister should be duty bound to ensure the observance of the Code of Ethics and the Code of Conduct by Ministers. This report, it was recommended, should include specific cases of violations, and action taken on these. This annual report should be put in the public domain. The Indian citizen is still waiting for this to happen.

As for Indian civil servants, Article 311 of the Constitution ensures for them a level of job protection that is nearly unique in the world. India is perhaps one of very few countries where a public servant, who, though an agent of the government, has the power to invoke Constitutional rights against the government, which is his/her employer. In fact, it could be argued that this extremely high level of job security easily emboldens a civil servant to act against public interest and indulge in corrupt practices, knowing that it is virtually impossible to dismiss him.

The Supreme Court and High Courts have laid down as many as 15 criteria to enable the conducting of an inquiry against a civil servant. The accused officer also has the right to challenge the legality of the action of the disciplinary authority before the Administrative Tribunal, get an interim stay of the proceedings and relief, and appeal against the decision of the authority. Plus, he reserves his fundamental right to invoke the writ jurisdiction of the High Court and the Supreme Court protesting the violation of such rights in the conduct of the inquiry. In other words, a government official is nearly invulnerable.

Several government committees have recommended the repeal of Article 311 and modification of Article 309, which defines service rules to radically simplify procedures when a civil servant is accused of misconduct, while providing adequate protection. As far back as 2002, the National Commission to Review the Working of the Constitution had recommended: “Yet the services have remained largely immune from imposition of penalties due to the complicated procedures that have grown out of the constitutional guarantee against arbitrary and vindictive action (Article 311). The constitutional safeguards have in practice acted to shield the guilty against swift and certain punishment for abuse of public office for private gain. A major corollary has been erosion of accountability. It has accordingly become necessary to revisit the issue of constitutional safeguards under Article 311 to ensure that the honest and efficient officials are given the requisite protection but the dishonest are not allowed to prosper in office. It advised that the procedure of administrative and legal action be rationalised and simplified “to bring the theory and practice of security and tenure in line with the experience of the last more than 50 years.”

It has become necessary to revisit the issue of constitutional safeguards under Article 311 to ensure that the honest and efficient officials are given the requisite protection but the dishonest are not allowed to prosper in office

An interesting new method to curb police corruption that has been used quite successfully in several countries in the West is the “integrity test”. Here is an extract from “Best Practices in Combating Corruption” published by the Office of the Coordinator for Economic and Environmental Activities, Austria: “Integrity testing has now emerged as a particularly useful tool for cleaning up corrupt police forces—and for keeping them clean. The object is to test the integrity of an official, and not to render an honest one corrupt through a process of entrapment. Most countries have agent provocateur rules in their criminal codes, which act as a judicial check on what is permissible. These rules vary from jurisdiction to jurisdiction, but they obviously have to be borne in mind.”

Since 1994, the New York City Police Department (NYPD) has conducted a very intensive programme of integrity testing. The department’s Internal Affairs Bureau creates fictitious scenarios based upon known acts of police corruption, like the theft of drugs and/or cash from a street level drug dealer, to test the integrity of NYPD officers. The tests are carefully monitored and recorded using audio and video electronic surveillance as well as the placement of numerous “witnesses” at or near the scene. The NYPD strives to make the scenario as realistic as possible and they are developed, based upon extensive intelligence collection and analysis.

The London Metropolitan Police has also initiated a similar programme of integrity testing, administered by specialist internal anti-corruption units, and all reports indicate that it’s working. To be forewarned is to be forearmed.

All private sector firms that are any good constantly seek customer feedback and try to improve their products and processes based on what they hear. Why should not it be the same in government? Many government offices have “suggestion boxes”, where a citizen can drop his suggestion. One wonders how many people actually do so, and even if they do, if these suggestions are treated with any seriousness by officials. Are they even read or responded to? Why cannot a mechanism be made mandatory? Why not link incentives with follow-up action? The private sector does all this as a matter of course. “Crowdsourcing” is already proven to be an extremely effective way to generate ideas that make a difference. And with the level of computerisation and connectedness that we have achieved, it can all be monitored and audited quite easily, and benefits quantified.

The right economic reforms will deliver growth. But that growth will remain lopsided and fragile without simultaneous and committed action on a parallel track, with the aim of ensuring that our governance and delivery systems are scrubbed clean.